Fear at China’s hold on WA coal

Power broker ... Yancoal’s $300 million deal for Premier Coal would place the state’s entire coal supply in foreign hands.
Photo: Reuters

KEY POINTS

Yancoal’s $300 million deal for Premier Coal would place the state’s entire coal supply in foreign hands.

The Premier wants to protect the main electricity producer’s contract.

The West Australian Premier is so worried that a Chinese coal company could pull the pin on the state’s power supply that he has asked for Canberra’s help.

Colin Barnett has written to the Foreign Investment Review Board to ensure Chinese coalminer Yancoal honours power contracts with the state’s main electricity producer.

He wants assurances that the coal supply contract with state-owned Verve Energy will continue before FIRB approves Yancoal’s $300 million purchase of Wesfarmers’ Premier Coal operations.

Yancoal’s purchase would see the state’s entire coal supplies in foreign hands. Indian power giant Lanco Infratech bought Griffin Coal – the state’s other main coalminer – for $750 million last December.

Mr Barnett told The Australian Financial Review he had written to FIRB because of the implications the sale had for the state’s energy supplies. “Our view is part of the FIRB approval should be that Yancoal has to honour existing contracts,” he said.

FIRB is an arm of the federal Treasury and under the ultimate supervision of Treasurer Wayne Swan.

The Liberal premier has been a frequent critic of the Gillard government and its mineral resource rent tax.

Analysts have questioned whether Wesfarmers makes money on the contract, given costs at its mine have been rising and it bid aggressively in 2005 to win Verve’s business.

Mr Barnett has previously criticised Wesfarmers for not keeping the government in the loop on the sale.

Verve was at one stage in negotiations to buy a stake in Premier, but broke off talks two weeks before the sale to Yancoal. Wesfarmers said it kept the government informed at all stages. Yancoal would not comment.

Separately, Mr Barnett confirmed that Lanco had reached agreement with the privately owned Bluewaters power station – which supplies about 10 per cent of the state’s electricity needs – over a coal pricing dispute. The brawl threatened to scuttle the $1 billion-plus sale of Bluewaters to Japanese companies Sumitomo and Kansai Electric.

The companies would not comment, but sources said Lanco had won a modest increase in the price of its coal and the Japanese firms had agreed to a cash injection to help Lanco overcome losses at its Collie operations with new equipment.

As for Yancoal, Mr Barnett said the state would not agree to paying more for Bluewaters’ power, although this was not sought. State Transport Minister Troy Buswell has said the resolution of the dispute was key to restarting Lanco’s talks over coal exports. He declined to comment. As for Yancoal, Mr Barnett said the government would not agree to paying higher prices for Bluewaters’ power, although this had not been sought. WA Transport Minister Troy Buswell has declared the resolution of the dispute as necessary for Lanco to restart negotiations with the government over coal exports, which is part of its plan to overcome its losses. Mr Buswell declined to comment yesterday